Google Ads has several automated bidding strategies, and Target ROAS is one of them. But what actually is it, and how does it work?
Target ROAS stands for Target Return on Ad Spend. It tells Google the average conversion value you want your advertising to generate for the money you spend.
In this guide, I’ll explain the numbers, which businesses it can suit and how to choose a realistic target. If you’re ready to change your settings, see my separate guide to how to set Target ROAS in Google Ads.
What Does Target ROAS Mean?
The easiest way to understand ROAS is with an example. If you spend £100 on advertising and generate £100 in tracked sales revenue, your actual ROAS is 100%. If those sales total £200, your ROAS is 200%.
- 100% ROAS: £1 in conversion value for every £1 spent.
- 200% ROAS: £2 in conversion value for every £1 spent.
- 500% ROAS: £5 in conversion value for every £1 spent.
- 1,000% ROAS: £10 in conversion value for every £1 spent.
The calculation is conversion value ÷ actual ad spend × 100. Use what you actually spent, rather than the budget you made available.
Your Target ROAS is the percentage you ask Google to work towards. Your actual ROAS is the return your campaign achieves. Setting a target of 500% does not guarantee that return.
Does 100% ROAS Mean You Have Broken Even?
If you’re tracking sales revenue, 100% ROAS means you have generated the same amount in revenue as you spent on advertising. However, that does not mean your business has broken even.
You still need to cover product costs, delivery, payment fees and other expenses. Even 200% ROAS could leave you losing money if your margins are tight.
The important thing is to work out what return your business needs, rather than treating any percentage above 100% as profit.
How Does Target ROAS Work in Google Ads?
Google uses the conversion values you report to predict the value of advertising opportunities. It adjusts bids automatically at auction time, aiming to maximise conversion value while working towards your average target.
An opportunity predicted to generate more value can attract a higher bid; one predicted to generate less can attract a lower bid. Individual conversions can return more or less than the target. Google aims towards it across overall performance.
You can read more in Google’s Target ROAS guidance.
This is why accurate tracking matters. If Google receives incorrect sales figures or unrealistic lead values, it is working towards the wrong objective.
How High Can You Set Target ROAS?
You can set a target below 100%, or a much higher percentage. Google’s API documentation specifies a range equivalent to 1% to 100,000%. Available settings can depend on the campaign and bidding setup. See Google’s documented Target ROAS range.
However, being able to enter a high number does not mean your campaign can achieve it.
Could a High Target Stop Your Campaign Spending?
Yes. An unrealistic target can restrict traffic and leave some of your budget unspent.
Imagine you sell a niche product with relatively few relevant searches. You set a target of 500%, but the campaign’s existing return is much lower. Google may struggle to find enough opportunities that meet your target.
There may be fewer competitive bids and fewer clicks, even though you have budget available. This is one possible cause of a campaign being limited by target.
A product with more search demand may offer more opportunities. However, search volume alone does not make a high target achievable. Competition, prices, conversion rate and margins still matter.
What Target ROAS Should You Start With?
My preference is to avoid setting an ambitious target straight away and gradually build it up as performance allows.
For some campaigns, I would consider starting around 100–200%. However, I would only do that where the business can afford that return during the test.
That range is not suitable for every business. If you need 400% ROAS to cover your costs, a 100% target could allow spending that you cannot sustain.
Look at your existing return, tracking accuracy and commercial requirements before choosing a number. Google also recommends using historical performance to inform your starting target, allowing for conversions that take time to come through. Its guide to switching to value-based bidding explains this approach.
What Types of Business Suit Target ROAS?
E-commerce Businesses
E-commerce is one of the clearest uses because orders have measurable values. If one customer spends £30 and another spends £200, accurate purchase tracking lets Google see the difference.
I prefer to have around 30 or more purchase conversions a month before relying heavily on this approach. That gives Google more data to work with, although it does not guarantee better results.
That is my practical preference, rather than a universal eligibility rule. Google currently lists at least 15 conversions in the previous 30 days at the conversion tracking level for Search and Shopping campaigns. Other campaign types have different requirements, as set out in its Target ROAS guidance.
Lead Generation Businesses
Target ROAS can also suit lead generation where enquiries have different values. A business might receive enquiries for both small jobs and larger contracts. Counting them equally can hide that difference.
You can assign values to different conversion actions, or send qualified-lead and completed-sale values back from your CRM. Google explains these options in its guide to using different conversion values.
Simply separating services into different ad groups does not tell Google their value. You need to report meaningful values through conversion tracking.
For an illustrative example, if 10% of enquiries become customers and an average sale generates £500 in revenue, the expected revenue per enquiry is £50. That is an estimate, rather than £50 already received. If you use estimated lead values, your reported ROAS reflects those estimates.
Target ROAS vs Target CPA
Target CPA works towards an average cost per conversion. Target ROAS works towards conversion value relative to advertising spend.
If every lead has roughly the same value, Target CPA may be worth considering. If sales or enquiries have different values, Target ROAS gives you a way to account for those differences.
Read my guide to what Target CPA means in Google Ads for the fuller comparison.
How Do You Set Target ROAS?
The quick version is to open your campaign settings, expand Bidding, select Target ROAS where available and enter your percentage. Check your conversion values before changing the strategy, then save and review performance.
For the screenshots, tracking checks and steps after saving, follow my Target ROAS setup guide.
Is Target ROAS Right for Your Campaign?
Target ROAS can be useful for e-commerce and lead generation when your conversion values are accurate and your target is realistic.
My recommendation is to avoid pushing the target too high too early. Start with a return your business can afford, use existing performance as a reference and adjust gradually.
If you would like help reviewing your tracking or bidding, request a free Google Ads audit.